Vedant Fashions (NSE:MANYAVAR) Could Be A Buy For Its Upcoming Dividend
Readers hoping to buy Vedant Fashions Limited (NSE:MANYAVAR) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Vedant Fashions' shares before the 21st of September to receive the dividend, which will be paid on the 28th of October.
The company's next dividend payment will be ₹7.75 per share. Last year, in total, the company distributed ₹7.75 to shareholders. Based on the last year's worth of payments, Vedant Fashions has a trailing yield of 1.4% on the current stock price of ₹554.70. If you buy this business for its dividend, you should have an idea of whether Vedant Fashions's dividend is reliable and sustainable. As a result, readers should always check whether Vedant Fashions has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Vedant Fashions is paying out an acceptable 50% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Vedant Fashions generated enough free cash flow to afford its dividend. Fortunately, it paid out only 41% of its free cash flow in the past year.
It's positive to see that Vedant Fashions's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
See our latest analysis for Vedant Fashions
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Vedant Fashions has grown its earnings rapidly, up 24% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Vedant Fashions could have strong prospects for future increases to the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, four years ago, Vedant Fashions has lifted its dividend by approximately 12% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
From a dividend perspective, should investors buy or avoid Vedant Fashions? We like Vedant Fashions's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. There's a lot to like about Vedant Fashions, and we would prioritise taking a closer look at it.
Ever wonder what the future holds for Vedant Fashions? See what the 10 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.